8.12.2011

the problem with republicans, cont'd

I had better things to do than watch last night's debate. Which is to say, anything.

But I have scanned through a couple of dozen reactions and summaries, and this one jumps out at me, from Mr. Friedersdorf:

The most noteworthy and damning moment of the GOP debate in Iowa Thursday was when the moderators asked the candidates to raise their hands if they would walk away from a deal that cut ten dollars from the deficit for every one dollar in tax increases. Every last person on stage said they'd reject that deal.

The only hope that lies therein, is that candidates can rarely be expected to keep promises made in debates. Because if this is actually true...if the alleged party of fiscal responsibility would actually dismiss out of hand something that is already too radically slanted towards spending cuts to ever pass...ladies and gentleman, we are fucked.

7 comments:

The question I have is whether the tax increases would actually increase revenue. It's counterintuitive, but the "goose" being plucked is already hissing, with tax evasion costing upwards of $300 billion annually, according to the IRS. At a certain point, he's going to start biting.

Along the same lines, since when do people get rich by being dumb with their money? Pro athletes and entertainers aside (and they usually end up broke anyways), prosperous people take their resources to where they can get the most bang for the buck. Right now, that's not the U.S., and tax hike proposals would make that worse.

More or less, it appears we're at the wrong place on the Laffer curve to be talking about raising more revenue, to put it mildly. At the very least, the economic pain would override any benefits, to put it mildly.

As I've said before, I'd love to believe that lowering taxes leads to increased revenue on the balance.

I just don't see much empirical evidence that this is actually true in practice, except in cases of extremely robust economic growth, which makes me question whether cutting taxes has anything at all to do with it.

And even if it is true some of the time, the boundary conditions obviously matter. If we cut the tax rate to 0%, revenues would not approach infinity.

That discussion aside, I see nothing in the history of the past couple of decades that suggests that "prosperous people" are doing anything with their money except accumulating wealth and protecting their interests. The surplus returns from increased productivity and globalization have been captured by minuscule portion of the very wealthy, while real wages in the middle class and lower have remained utterly flat.

Marginal tax rates are the lowest they've been in half a century. The goose can kiss my ass.

Bubba: Sorry...I just realized that I blasted right past your mention of the Laffer curve (as indicated by my mention of boundary conditions.)

This is not my area of expertise, but the problem with the Laffer curve (as I see it) is that it difficult to impossible to know where we are on it at any given time (assuming that it is a pretty good model of reality, which it may be in some form). Even if we ran an "experiment" where we manipulated tax rates over time and looked at the results, we'd still have to account for economic growth (or the lack thereof) over the course of the experiment (to just name only the most obvious confounding variable, of what I'm sure are many.)

I'd be willing to bet the mathematics is very analogous to understanding drug distribution to a particular organ in the body (something I do actually know a few things about), in that relationships that seem superficially simple get really complicated and unpredictable once you really start taking variables into account.

My guess would be that the Laffer curve is a decent general model, but we might have to be open to the possibilities that 1) more than one peak exists, 2) the peak drifts, in a complex and unpredictable way, due to other variables (this seems likely, given how many studies seem to find peaks anywhere from 20 to 70%), or 3) both.

I would guess that barring some substantial advances in empirical economics, the best that can be done in the short term is to look at the impact of recent changes in rates on revenue. On that front, I think it (currently) argues for more taxes as part of a comprehensive approach to reigning in the budget.

While I understand the politics of all the candidates declaring their 100% opposition to cooperating with democrats, I think you can make a decent argument that our fiscal problems are not related to revenue. That is to say, even without considering the macroeconomic consequences of tax increases, I don't think the federal government can tax itself back into the black. Frankly, the federal government spends too much. Also, I would be suspicious of any plan that combines spending cuts with tax increases, mostly because those plans inevitably spread the cuts out over some very long time frame, but immediately institute the tax increases. I am pretty sure that is the deal that Bush 41 agreed to in 1991 and not only did the spending cuts never materialize, but he was then savaged by the very democrats he made the deal with for raising taxes. That political lesson looms large for most GOP candidates. In summary, the fundamental problem with our federal (and state) budget is that people continue to want to receive services that they don't have to pay for. A tax increase, especially one on the "rich", continues that process - our country will not be able to reestablish rational fiscal policies until that mentality ends. And, although it was masked by a fair amount of rhetorical flourish, I think that's the message that some/most of the GOP candidates were trying to convey.

Brian, you missed my point; centrally, I think we're at a point in this country where we may be unable to collect more in taxes. More or less, because government is corrupt, taxpayers are becoming like Italians and Greeks--raising tax rates will most likely NOT raise additional revenue for that reason. Go much higher in taxes, and capital will flee.

Regarding what the rich do with their money, they use it for purposes that suit them, just like you and I. In doing so--spending, saving, giving, being taxed--they serve the interests of the rest of us without ever being asked. For that matter, they do it a heck of a lot better than government does, as few rich people fund boondoggles like light rail, bridges to nowhere, hybrid and electric cars, and such.